Corporate Rescue Law – An Anglo-American Perspective
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Corporate Rescue Law – An Anglo-American Perspective

Gerard McCormack

This book offers an unprecedented and detailed comparative critique of Anglo-American corporate bankruptcy law. It challenges the standard characterisation that US law in the sphere of corporate bankruptcy is ‘pro-debtor’ and UK law is ‘pro-creditor’, and suggests that the traditional thesis is, at best, a potentially misleading over-simplification. Gerard McCormack offers the conclusion that there is functional convergence in practice, while acknowledging that corporate rescue, as distinct from business rescue, still plays a larger role in the US. The focus is on corporate restructurings with in-depth scrutiny of Chapter 11 of the US Bankruptcy Code and the UK Enterprise Act, and offers other comparative oversights.
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Chapter 6: Financing the Debtor

Gerard McCormack


5. The automatic stay – barring individual creditor enforcement actions The automatic stay or moratorium on creditor enforcement actions is an intrinsic feature of both administration in the UK and Chapter 11 in the US.1 Put simply, the commencement of administration or the initiation of the Chapter 11 process imposes a freeze on proceedings or executions against the company and its assets. This moratorium provides a breathing space during which the company has an opportunity to make arrangements with its creditors and shareholders for the rescheduling of its debts, and the reorganisation and restructuring of its affairs. In the US, the existence of the moratorium or stay has been rationalised as follows:2 The automatic stay is one of the fundamental debtor protections provided by the bankruptcy laws. It gives the debtor a breathing spell from his creditors. It stops all collection efforts, all harassment, and all foreclosure actions. It permits the debtor to attempt a repayment or reorganisation plan, or simply to be relieved of the financial pressures that drove him into bankruptcy. A secured creditor, along with anybody else affected by the statutory moratorium, may apply to have the stay lifted. This is the position both in the UK and in the US though, in the latter, there is a specific requirement of ‘adequate protection’ for the holders of property rights.3 Examples of ‘adequate protection’ are provided in the legislation although the concept 1 The stay on entry into administration is similar though more extensive in its effects than...

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